Last week, Nifty touched a new high of 23,490 and closed with gains of 175 points (+0.8%) at 23,466 levels.
Credit: Reuters Photo
This truncated week, we expect market uptrend to continue, supported by positive macro trends, expectation of sustained government spending and policy continuity, healthy monsoon and strong earnings. Domestic markets will remain closed on Monday, while global investors will keep an eye on Bank of England and China's central bank interest rate decisions. PMI data will be released by the United States, India and Europe along with Europe inflation data and US retail sales data.
Last week, Nifty touched a new high of 23,490 and closed with gains of 175 points (+0.8%) at 23,466 levels. Broader markets outperformed with Midcap100 and Smallcap100 up 3.8% and 4.8% respectively. Reduced political overhang and cool-off in inflation in both India and US uplifted market sentiments. Positive global cues along with continued domestic buying too helped the markets. Except fast moving consumer goods and IT stocks, all sectors ended in green with realty, automotive, infrastructure, and state-owned banks gaining 3-6%.
Investors regained confidence with government formation and announcement of cabinet portfolios. This led to notable activity in PSU stocks. India’s retail inflation too cooled down to a 1-year low, resulting in 10-year bond yields falling to a 4-month low of 7%. With a good monsoon expected, inflation might cool down further, thus raising hopes of a rate cut by the Reserve Bank of India
With the markets at a new high, inflows into equity mutual funds surged 83% to a record high of Rs 34,000 crore in May and inflows through the SIP route continued to reach new all-time highs.
Post the cabinet portfolio allocation, the government has started outlining its vision for the next five years, thus reflecting policy continuity. Defence, shipbuilding, and capital goods companies saw buying interest once again as the Defence ministry outlined plans to increase defence exports to Rs 50,000 crore by 2028-29 from the current Rs 21,083 crore.
The government is also discussing incorporation of petroleum products into Goods and Service Tax. Further, the petroleum ministry is also on track to reach its 20% ethanol blending target by 2025. Most of the sugar stocks gained after media reports that the centre is considering raising the minimum sale price for the 2024-25 season. Fertiliser stocks also saw buying interest after the Prime Minister released the latest installment of the Kisan Samman Nidhi.
On the global front, US markets touched new highs after inflation remained unchanged for the month of May. This, along with rise in jobless claims led to fall in Treasury yields. The Federal Reserve kept the rates unchanged in line with expectations but the tone was hawkish as it signalled only one rate cut this year.
Overall, we continue to maintain a positive outlook and see any dips as a buying opportunity.
(The writer is the head of retail research, Motilal Oswal Financial Services Ltd)